M&M Finance, Blue Star: Trading strategies for 5 highly overbought stocks

Mahindra & Mahindra Financial Services, Sonata Software Limited, and Blue Star may rise up to 10 per cent in the overbought territory of RSI.

Relative Strength Index (RSI) assists in ascertaining the strength of indices and stocks, by identifying overbought and oversold territories. It is a technical oscillator that reads underlying momentum on the scale of 0-100. Herein, an instrument trading over 70 is read as overbought, while one trading below 30 as oversold. 

As per the technical indictor, stocks trading in the overbought category are viewed as highly overpriced, with prices expected to correct. Similarly, an oversold condition suggests stocks are significantly under-price.

Currently, five major stocks in Nifty500 index are defying this theory, as they continue to hit higher levels into the overbought category,